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Emerging-market currencies are in free fall. An index of the major developing-nation currencies fell to an all-time low this week, extending its drop over the past year to 19%, according to data compiled by Bloomberg going back to 1999. The Russian ruble, Colombia’s peso and the Brazilian real have fallen more than 30% over the past year for some of the worst global selloffs. China’s economic slowdown is pushing down commodity prices, weighing on raw-material exporters from Brazil to Mexico and South Africa. Adding to the pain is the expectation that the Federal Reserve will soon embark on the first interest rate increase since 2006, threatening to lure capital away from developing nations.

“This combination of a soft landing in China and a Fed that will normalize rates soon poses significant risks to emerging markets, especially their currencies,” Stephen Jen, a former IMF economist who is now managing partner at SLJ Macro Partners in London, wrote in a July 23 note. Jen said he expects “a violent sell-off in some emerging-market currencies in the second half this year.” While currency depreciation tends to spur growth by making exports cheaper, so far this is not happening because global trade has stalled, according to Citigroup and UBS. The IMF forecasts emerging markets will grow 4.2% this year, the slowest since 2009.

The currencies of Brazil, Mexico, South Africa and Turkey have all crashed to multi-year lows as investors flee emerging markets and commodity prices crumble. The drastic moves came as fears of imminent monetary tightening by the US Federal Reserve combined with shockingly weak figures from China, which stoked fears that the country may be sliding into a deeper downturn and sent tremors through East Asia, Latin America and Africa. The Caixin/Markit manufacturing survey for China fell to a 15-month low of 48.2 in July, with a sharp drop in new export orders. Danske Bank said the slide “pours cold water” on hopes of a quick recovery from the slump seen earlier this year. Brazil’s real plummeted to a 12-year low of 3.34 to the dollar, reflecting the country’s heavy reliance on exports of iron ore and other raw materials to China.

The devaluation tightens the noose on Brazilian companies saddled with $188bn in dollar debt taken out during the glory days of the commodity boom. The oil group Petrobras alone raised $52bn on the US bond markets. Mexico’s peso hit a record low of 16.24 against the dollar. The country’s foreign exchange commission is mulling emergency action to defend the currency, despite the extreme reluctance of the Mexican authorities to meddle with market forces. Colombia’s peso collapsed 5.2pc to a historic low on Friday, a huge move in a single day. Similar dramas played out in Chile and a string of countries deemed vulnerable to the combined spill-overs from China and the US. The MSCI index of emerging market equities fell to 1.8pc to 36.92 and may soon test four-year lows.

Bernd Berg, from Societe Generale, said Brazil faces a “perfect storm” as the economy slides into deeper recession and corruption scandals spread. New worries about political risk may soon push the real to 3.60, a once unthinkable level.There is mounting concern that President Dilma Rousseff could be impeached for her failure to stop pervasive malfeasance at Petrobras. Brazil’s travails come just as the US nears full employment and the Fed prepares to raise interest rates for the first time in eight years. issuing what amounts to a “margin call” for emerging markets that have borrowed $4.5 trillion in dollars. Mr Berg said Brazil’s debt may be cut to junk status over coming months. This would be a humiliating blow for a country that thought it had escaped the endless cycle of debt booms and populist misrule, and saw itself as a pillar of a new BRICS-led global order.

Where the Andean foothills dip into the Amazon jungle, nearly 1,000 Chinese engineers and workers have been pouring concrete for a dam and a 15-mile underground tunnel. The $2.2 billion project will feed river water to eight giant Chinese turbines designed to produce enough electricity to light more than a third of Ecuador. Near the port of Manta on the Pacific Ocean, Chinese banks are in talks to lend $7 billion for the construction of an oil refinery, which could make Ecuador a global player in gasoline, diesel and other petroleum products. Across the country in villages and towns, Chinese money is going to build roads, highways, bridges, hospitals, even a network of surveillance cameras stretching to the Galápagos Islands.

State-owned Chinese banks have already put nearly $11 billion into the country, and the Ecuadorean government is asking for more. Ecuador, with just 16 million people, has little presence on the global stage. But China’s rapidly expanding footprint here speaks volumes about the changing world order, as Beijing surges forward and Washington gradually loses ground. While China has been important to the world economy for decades, the country is now wielding its financial heft with the confidence and purpose of a global superpower. With the center of financial gravity shifting, China is aggressively asserting its economic clout to win diplomatic allies, invest its vast wealth, promote its currency and secure much-needed natural resources.

It represents a new phase in China’s evolution. As the country’s wealth has swelled and its needs have evolved, President Xi Jinping and the rest of the leadership have pushed to extend China’s reach on a global scale. China’s currency, the renminbi, is expected to be anointed soon as a global reserve currency, putting it in an elite category with the dollar, the euro, the pound and the yen. China’s state-owned development bank has surpassed the World Bank in international lending. And its effort to create an internationally funded institution to finance transportation and other infrastructure has drawn the support of 57 countries, including several of the United States’ closest allies, despite opposition from the Obama administration.

Even the current stock market slump is unlikely to shake the country’s resolve. China has nearly $4 trillion in foreign currency reserves, which it is determined to invest overseas to earn a profit and exert its influence. China’s growing economic power coincides with an increasingly assertive foreign policy. It is building aircraft carriers, nuclear submarines and stealth jets. In a contested sea, China is turning reefs and atolls near the southern Philippines into artificial islands, with at least one airstrip able to handle the largest military planes. The United States has challenged the move, conducting surveillance flights in the area and discussing plans to send warships.

You’ve heard of Made in China. Get ready for Sold in China. For decades, China has exported cheap goods to the rest of the world even while domestic consumption waned. Now, the country’s shoppers could be set for a reboot. If the government delivers on its promise to transform the economy by encouraging spending on the high street, China’s consumer base has the potential to hit $67 trillion over the next decade, according to The Demand Institute, a think tank jointly run by The Conference Board and Nielsen. Global interest in Chinese shoppers is already high. Music doyenne Taylor Swift has teamed up with JD.com Inc., the second-largest e-commerce company in China, to sell a new fashion line designed specifically for Chinese shoppers.

At the movies, ticket sales are surging, with first-half box office revenue this year rising to 20 billion yuan ($3.2 billion), compared with just 4 billion yuan in all of 2008. The hard economic data are also showing a shift, albeit slowly. Consumption in China contributed 60% to gross domestic product growth in the first half, even as the country grew at its slowest in 25 years. Part of the spending increase is down to a government led push to shift the economy away from debt fueled investment and more toward consumption. But that won’t happen overnight: Consumption’s share of the economy eased to 28% in 2011 from 76% in 1952, according to the Demand Institute. “There are signs that the decline in consumption’s share of GDP may have abated, but it has certainly not yet been reversed,” the report’s lead authors said.

In its analysis, the Demand Institute modeled two scenarios, both based on GDP growth slowing from around 7% to 4% by 2019 where it would stay until 2025. Under the first scenario – which they figure is the most likely – the consumption share of GDP would remain constant at about 28% between 2015 and 2025, with total spending reaching 330 trillion yuan or $53 trillion. In the second case, where consumption reaches 46% of output by 2025, or annual spending rises 126%, consumption would balloon to 420 trillion yuan, or $68 trillion. The analysis is based on the development of 167 countries between 1950 and 2011. Countries with similar underlying fundamentals to China saw consumption remain flat relative to GDP for some time after it stopped falling. If China’s shoppers do take off, it will be from a relatively low base. Using the latest available comparative data from 2011, consumption in China made up 28% of real GDP, according to the report. That compares with 76% in the U.S., 67% in Brazil, 60% in Japan, 59% in Germany, and 52% in India.

Let’s start with the geopolitical Big Bang you know nothing about, the one that occurred just two weeks ago. Here are its results: from now on, any possible future attack on Iran threatened by the Pentagon (in conjunction with NATO) would essentially be an assault on the planning of an interlocking set of organizations – the BRICS nations (Brazil, Russia, India, China, and South Africa), the SCO (Shanghai Cooperation Organization), the EEU (Eurasian Economic Union), the AIIB (the new Chinese-founded Asian Infrastructure Investment Bank), and the NDB (the BRICS’ New Development Bank) – whose acronyms you’re unlikely to recognize either. Still, they represent an emerging new order in Eurasia. Tehran, Beijing, Moscow, Islamabad, and New Delhi have been actively establishing interlocking security guarantees.

They have been simultaneously calling the Atlanticist bluff when it comes to the endless drumbeat of attention given to the flimsy meme of Iran’s “nuclear weapons program.” And a few days before the Vienna nuclear negotiations finally culminated in an agreement, all of this came together at a twin BRICS/SCO summit in Ufa, Russia – a place you’ve undoubtedly never heard of and a meeting that got next to no attention in the U.S. And yet sooner or later, these developments will ensure that the War Party in Washington and assorted neocons (as well as neoliberalcons) already breathing hard over the Iran deal will sweat bullets as their narratives about how the world works crumble.

With the Vienna deal, whose interminable build-up I had the dubious pleasure of following closely, Iranian Foreign Minister Javad Zarif and his diplomatic team have pulled the near-impossible out of an extremely crumpled magician’s hat: an agreement that might actually end sanctions against their country from an asymmetric, largely manufactured conflict. Think of that meeting in Ufa, the capital of Russia’s Bashkortostan, as a preamble to the long-delayed agreement in Vienna. It caught the new dynamics of the Eurasian continent and signaled the future geopolitical Big Bangness of it all. At Ufa, from July 8th to 10th, the 7th BRICS summit and the 15th Shanghai Cooperation Organization summit overlapped just as a possible Vienna deal was devouring one deadline after another.

Consider it a diplomatic masterstroke of Vladmir Putin’s Russia to have merged those two summits with an informal meeting of the Eurasian Economic Union (EEU). Call it a soft power declaration of war against Washington’s imperial logic, one that would highlight the breadth and depth of an evolving Sino-Russian strategic partnership. Putting all those heads of state attending each of the meetings under one roof, Moscow offered a vision of an emerging, coordinated geopolitical structure anchored in Eurasian integration. Thus, the importance of Iran: no matter what happens post-Vienna, Iran will be a vital hub/node/crossroads in Eurasia for this new structure.

Why this horror? Greeks are now asked to pay a high price, but not for a realist perspective of growth. The price they are asked to pay is for the continuation of the “extend and pretend” fantasy. They are asked to ascend to their actual suffering in order to sustain another’s—the Eurocrats’—dream. Gilles Deleuze said decades ago: “Si vous êtes pris dans le rêve de l’autre, vous êtes foutus” (“If you are caught into another’s dream, you are fucked.” This is the situation in which Greece now finds itself: Greeks are not asked to swallow many bitter pills for a realist plan of economic revival, they are asked to suffer so that others can go on dreaming their dream undisturbed. The one who now needs awakening is not Greece but Europe.

Everyone who is not caught in this dream knows what awaits us if the bailout plan is enacted: another €90 billion or so will be thrown into the Greek basket, raising the Greek debt to €400 or so billions (and most of those billions will quickly return back to Western Europe—the true bailout is the bailout of German and French banks, not of Greece), and we can expect the same crisis to explode again in a couple of years. But is such an outcome really a failure? At an immediate level, if one compares the plan with its actual outcome, obviously yes. At a deeper level, however, one cannot avoid a suspicion that the true goal is not to give Greece a chance but to change it into an economically colonized semi-state kept in permanent poverty and dependency, as a warning to others. But at an even deeper level, there is again a failure – not of Greece, but of Europe itself, of the emancipatory core of European legacy.

The “no” of the referendum was undoubtedly a great ethico-political act: against a well-coordinated enemy propaganda spreading fears and lies, with no clear prospect of what lies ahead, against all pragmatic and “realist” odds, the Greek people heroically rejected the brutal pressure of the EU. The Greek “no” was an authentic gesture of freedom and autonomy. The big question is, of course, what happens the day after, when we have to return from the ecstatic negation to the everyday dirty business? And here, another unity emerged, the unity of the “pragmatic” forces (Syriza and the big opposition parties) against the Syriza Left and Golden Dawn. But does this mean that the long struggle of Syriza was in vain, that the “no” of the referendum was just a sentimental empty gesture destined to make the capitulation more palpable?

The negotiations leading up to the latest tentative deal on Greece’s debt brought into relief two competing visions of the European Union: the flexible, humane, and political union espoused by France, and the legalistic and economy-focused union promoted by Germany. As François Heisbourg recently wrote, “By openly contemplating the forced secession of Greece [from the eurozone], Germany has demonstrated that economics trumps political and strategic considerations. France views the order of factors differently.” The question now is which vision will prevail? The Greeks, for their part, have been putting their national identity ahead of their pocketbooks, in ways that economists do not understand and continually fail to predict.

It is economically irrational for Greeks to prefer continued membership in the eurozone, when they could remain in the EU with a restored national currency that they could devalue. But, for the Greeks, eurozone membership does not mean only that they can use the common currency. It places their country on a par with Italy, Spain, France, and Germany, as a “full member” of Europe – a position consistent with Greece’s status as the birthplace of Western civilization. Whereas that stance reflects the vision of an “ever-closer union” that motivated the EU’s founders, Germany’s narrower, economic understanding of European integration cannot inspire ordinary citizens to support the compromises necessary to keep the EU together. Nor can it withstand the inevitable attacks directed against EU institutions for every action and regulation that citizens dislike and for which national politicians want to avoid responsibility.

The original European Economic Community, created by the Treaty of Rome in 1957, was, as the name indicates, economic in nature. The Treaty itself was hard-headed, grounded in the converging economic interests of France and Germany, with the Benelux countries and Italy rounding out the basis of a new European economy. But economic integration was underpinned by a vision of peace and prosperity for Europe’s peoples, after centuries of unprecedented violence had culminated in two world wars that reinforced the seemingly eternal enmity between France and Germany. And, indeed, the language of a larger political union was embedded in Europe’s treaties, to be interpreted by the European Court of Justice and subsequent generations of European decision-makers in ways that supported the construction of a common European polity and identity, as well as a unified economy.

My mother, a young Belgian in the 1950s, remembers the idealism and the excitement of the European federalist movement, with its promise that her generation could create a different future for Europe and the world. To be sure, the vision of a United States of Europe, espoused by many of those early federalists, looked backward to the founding of the US, rather than forward to a distinctive European venture. Nonetheless, the EU that emerged – which pools sovereignty sufficiently to benefit from being a powerful regional entity in a world of almost 200 countries while maintaining its members’ distinct languages and cultures – is something new.

The Luxembourg Bourse said it authorized a resumption of trading Greek bonds on Friday. The exchange lifted a suspension on trading securities issued by 25 Greek entities, from government bonds to those of Alpha Bank SA and Hellenic Telecommunications Organization SA, according to a statement. Trading was halted at the end of June as the Greek government shuttered its financial markets. The nation’s banks reopened on July 20, though limits on withdrawals are only being eased gradually and officials said they will extend the shutdown of its stock and bond markets at least through Monday. Greek bond trading was scant even before the suspension, with the central bank’s electronic secondary securities market, or HDAT, recording no turnover on the government’s notes in June, according to Athens News Agency.

Dear Yanis, dear Dominique: There is a place on earth that represents Europe’s very roots: Greece. Let us begin there. Athens, April 28, 1955. Albert Camus’ conference on “The future of Europe”.[1] On this occasion, participants agreed that the structural characteristics of European civilization are essentially two: the dignity of the individual; a spirit of critique. At that time (1955), human dignity was a focus of much debate in Europe. Nobody doubted, however, the European “spirit of critique”. There were no doubts about the rationalist, Cartesian, Enlightened vision, which was agent and engine of continuous progress on the continent, as much in terms of technical-scientific domination as for political, social and economic domination.

Today, more than half a century later, we might well invert these two: human dignity is widely appreciated throughout Europe, albeit challenged by dramatic problems generated by immigration; it is the force of reason in Europe that no longer underlies continuous progress. Why is this so? What happened? It was not some shadowy curse that descended upon the continent. It was not some evil hand that sowed our fields with salt. So what did happen? Just as the dinosaurs died off because an asteroid slammed into the planet, so was dinosaur Europe struck by 4 different phenomena. Each was revolutionary even when taken alone, but all together, one after another, they proved enough to cause an explosion, an implosion, paralysis: enlargement, globalization, the euro, the crisis.

And that is not all. During the process of political union, we took a wrong turn at one point. We failed to unite that which could be and needed to be united (such as defense). Instead, we united that which did not need to be united (for example, the size of vegetables). This is why, in Europe today, it is not “more union” that we need. What we need is to propose, discuss and design new “articles of confederation”. Dear Yanis, dear Dominique, we agree on the fact that life and civilization cannot be reduced to mere calculations of interest rates; we agree that today, in Europe, it is not the technicalities that need changing but the political vision. History teaches us that in order to reach our goal we must change what is inside people’s heads or – at the very least – admit that mistakes have been made. We agree that the piazzas of protest are to be avoided, but that we must find a new road, down which we can all walk, regardless of our country or political party of origin.

Arresting the central bank’s governor. Emptying its vaults. Appealing to Moscow for help. These were the elements of a covert plan to return Greece to the drachma hatched by members of the Left Platform faction of Greece’s governing Syriza party. They were discussed at a July 14 meeting at the Oscar Hotel in a shabby downtown district of Athens following an EU summit that saw Greece cave to its creditors, leaving many in the party feeling despondent and desperate. The plans have come to light through interviews with participants in the meeting as well as senior Greek officials and sympathetic journalists who were waiting outside the gathering and briefed on the talks.

They offer a sense of the chaos and behind-the-scenes manoeuvring as Greece nearly crashed out of the single currency before prime minister Alexis Tsipras agreed to the outlines of an €86bn bailout at the EU summit. With that deal still to be finalised, they are also a reminder of the determination of a sizeable swath of Mr Tsipras’ leftwing party to return the country to the drachma and increase state control of the economy. Chief among them is Panayotis Lafazanis, the former energy and environment minister and leader of Syriza’s Left Platform, which unites a diverse group of far left activists — from supporters of the late Venezuelan president Hugo Chávez to old-fashioned communists. He was eventually sacked in a cabinet reshuffle after voting against reforms tied to the bailout.

“Obviously it was a moment of high tension,” a Syriza activist said, describing the atmosphere as the meeting opened. “But you were also aware of a real revolutionary spirit in the room.” Yet even hardline communists were taken aback when Mr Lafazanis proposed that the Syriza government should seize control of the Nomismatokopeion, the Greek mint, where the bulk of the country’s cash reserves are kept. “Our plan is that we go for a national currency. This is what we should have done already. But we can do it now,” he said, according to people present at the meeting. Mr Lafazanis said the reserves, which he claimed amounted to €22bn, would pay for pensions and public sector wages and also keep Greece supplied with food and fuel while preparations were made for launching a new drachma.

Meanwhile, the central bank would immediately lose its independence and be placed under government control. Its governor, Yannis Stournaras, would be arrested if, as expected, he opposed the move. “For people planning a conspiracy to undermine the Greek state, they were pretty open about it,” said one reporter who staked out the event. The plan demonstrates the apparently ruthless determination of Syriza’s far leftists to pursue their political aims — but also their lack of awareness of the workings of the eurozone financial system. For one thing, the vaults at the Nomismatokopeion currently hold only about €10bn of cash — enough to keep the country afloat for only a few weeks but not the estimated six to eight months required to prepare, test and launch a new currency.

The Syriza government would have quickly found the country’s stash of banknotes unusable. Nor would they be able to print more €10 and €20 banknotes: From the moment the government took over the mint, the ECB would declare Greek euros as counterfeit, “putting anyone who tried to buy something with them at risk of being arrested for forgery,” said a senior central bank official. “The consequences would be disastrous. Greece would be isolated from the international financial system with its banks unable to function and its euros worthless,” the official added. As the details of the Left Platform meeting have leaked out, some political opponents are demanding an accounting.

In an inauspicious start to talks over awarding Greece a third bailout, international officials have postponed the negotiations after failing to agree with their hosts where they will stay and how they will operate when in Athens. Mission chiefs representing the troika of creditors – the European commission, European Central Bank and International Monetary Fund – were forced to delay discussions over the €86bn (£61bn) programme after it emerged they had been unable to agree on a secure venue in the capital. “There are some logistical issues to solve, notably security-wise,” said a European commission official. “Several options are on the table.”

The leftwing government in Athens, which had previously vowed to never let the auditors step foot in Greece again, is understood to be irritated by demands that the creditor team is given free access to ministries and files. Acutely aware of the anger the monitors have triggered in the past, due to the austerity measures attached to previous bailouts, it has insisted the mission heads stay in a hotel outside the Greek capital. “A lot of trust has been lost and the big issue is who they are going to see, what ministries they are going to be let into, what files are going to be made available,” said Anna Asimakopoulou, a shadow finance minister with the main opposition New Democracy party. “That, of course, will be a big defeat for the government given that negotiations have moved to Brussels for the past six months but that is what they want, due diligence at a deeper level. Holding talks in a hotel is just not practical.”

Symbolically, the inspectors’ return is humiliating for Prime Minister Alexis Tsipras who won power in January promising to dismantle the troika. The European commission wants a deal to be reached on a bailout programme by the second half of August when Greece must honour a €3.4bn debt repayment to the ECB. But with the talks also expected to be extremely tough there are few who believe that deadline will be met. Instead EU officials have signalled the debt-stricken country will likely be given a bridging loan – as it was earlier this week – to avert default. “It is difficult to envisage these negotiations ending before early September at the earliest,” said Asimalopoulou, the shadow finance minister.

While Tsipras has been forced into a humiliating climbdown over the sale of state assets, he has repeatedly branded the entire bailout plan as a bad deal that he doesn’t believe in. Unions with ties to the governing party have already vowed to “wage war” to stop the sale of docks in Piraeus, where the Chinese conglomerate, Cosco, currently manages three piers. With the debt-stricken country on its knees, officials have stressed that the prime minister will fight to ensure the denationalisations are not seen as a fire sale. However, independent observers fear just that. “Privatisation in Greece right now means a fire sale,” political economist Jens Bastian said.

Bastian was one of the officials responsible for privatisation under the European commission’s Taskforce for Greece, a body of experts distinct from the troika. He thinks it was a “political mistake” to set a target to raise €50bn from asset sales, in the absence of support from Greek politicians across the political spectrum, from the centre-right New Democracy party, to Pasok on the centre-left and Syriza on the left. “We have never had a political majority to embrace the idea of privatisation. How are you going to create the political momentum that has been absent in the past years under more difficult conditions today?” he asks. Greece’s creditors share such scepticism. Their answer is tighter controls. The privatisation fund will be managed by Greeks under the close watch of creditors.

The privatisation fund has few precedents, although it has been compared to the Treuhandanstalt, the German agency created in the dying days of the GDR to privatise East German assets shortly before reunification. Greece’s former finance minister, Yanis Varoufakis, was one of the first to draw the parallel, although others offer the comparison unprompted. Peter Doyle, a former IMF economist, says the Treuhand offers the closest parallels: the agency had full control over government ministries to sell assets quickly. “The principal task was to sell these things to somebody for cash.”

Greece started loosening restrictions on foreign transfers by businesses on Friday, unblocking imports held up after the country introduced capital controls last month. “The daily limit (on money transfers) has been raised to 100,000 euros from 50,000 euros,” central bank governor Yannis Stournaras told reporters, adding that this covered almost 70% of requests. Greek businesses have been hit by limits on transferring money abroad to pay for imports of raw material and other items since capital controls started on June 29, and have had to apply to a special committee for permission to pay their foreign suppliers, a time-consuming process. Stournaras said conditions for businesses were improving and authorities aimed to resolve pending issues in the next 10 days.

“As far as approvals are concerned, we are now very close to the monthly imports the Greek economy was registering before the crisis,” he said after meeting business leaders on Friday. Greece reopened its banks on Monday after it secured a €7.2 billion bridging loan to pay its debt obligations and enacted tough reforms demanded by its lenders to start negotiations on a third bailout. The banks’ three-weeks shutdown has cost Greek businesses €3 billion, said the head of Athens Chamber of Commerce and Industry Constantinos Michalos, with many firms warning of closures as a result of the capital curbs. Greece has approved requests for money transfers totaling €1.585 billion from June 29 to July 23, much of it earmarked for energy imports, according to the Bank of Greece on Friday.

A “temporary” Greek exit from economic and monetary union, proposed by Germany, supported by many German-leaning euro members, yet hotly opposed by France and Italy, was narrowly averted in the marathon negotiations that ended on July 13. But the suggestion may still eventually decide Greece’s fate in the euro. The divergence between the two countries traditionally seen as the motor of the European Union demonstrates new fragility in Franco-German relations that looks likely to cast a shadow over European cooperation for some time to come. Wolfgang Schaeuble, the German FinMin, whose hard line on Greece ended up determining Angela Merkel’s negotiating stance, has made clear in the week since the ill-tempered European summit on Greece that he still favors a Greek exit from the euro .

Once it would have feared European isolation, but Germany now puts forward views opposed by France with demonstrative self-confidence. This reflects not only manifest German economic strength but also EMU membership by several smaller nations from central and eastern Europe that take an even more robust attitude than Germany on the Greek economy. From the Baltic to former Yugoslavia, small euro states that were previously part of the Eastern bloc have been converted to German allies and steadfast proponents of monetary orthodoxy. European changes since German reunification 25 years ago represent a double blow for France. The Germans used to be France’s buffer zone against the Soviet Union.

Yet as the new round of EMU antagonism shows, a cluster of small ex-communist countries now play a similar role – but now as buffer states to protect Germany against France. We shall see reinforced efforts in coming months by French President François Hollande and Italian Prime Minister Matteo Renzi to build a European coalition opposing German-style austerity — an alliance that could find support (depending on economic and political developments) in Madrid and Lisbon. The problem for Hollande is the same one that faces Sigmar Gabriel, the German Social Democrat leader and deputy chancellor in Merkel’s coalition. Full-blooded efforts to resist the Merkel-Schaeuble line on Greece, and downgrade efforts at economic discipline or supply-side reforms, are likely to generate strong countervailing pressures.

Much has been made of the rift between Germany and France over how the European Union has handled the Greek crisis, with Berlin maintaining a hard line on debt and austerity and Paris, belatedly, calling for a more flexible approach. [..] it is the partnership of equals between these two countries that has driven European integration. The problem is that France has fallen into a political malaise with a series of weak leaders and a disenchantment with politicians as a whole. This malaise results largely from prolonged economic doldrums — stagnant growth, persistent high unemployment — as France tries to conform to the fiscal strictures dictated by Germany’s narrow view of economics and enshrined in the treaty terms for monetary union.

French President François Hollande and his prime minister, Manuel Valls, have abandoned the campaign pledges to foster growth that brought them to power and instead are trying to make France more like Germany. To call the results disappointing would be an understatement. The political backlash creates an opening for the anti-euro, anti-EU National Front under Marine Le Pen, who continues to surge in polls as a leading contender for president in 2017. Le Pen, the daughter of National Front founder Jean-Marie Le Pen, announced this month that she will put her electability to the test this December in regional elections as she heads the party’s campaign in the depressed Nord-Picardy region in northern France.

The elections for governing councils in France’s 13 newly re-constituted regions will provide the broadest test yet of Marine Le Pen’s efforts to soften the National Front’s image and make it more acceptable to mainstream voters. Polls have her winning that election in two rounds of voting, which wouldgive her considerable leverage heading into the presidential campaign. In addition, her niece, Marion Maréchal-Le Pen, the 25-year-old granddaughter of Jean-Marie Le Pen and currently a National Front member of Parliament, is leading the regional election polls in the more prosperous Provence region in southern France.

The Finnish economy has been hit by three shocks over the past decade:
• Nokia has more or less disappeared;
• The paper industry is in crisis;
• And recently the Russian crisis has hurt Finland’s economy too.

These have all caused a very significant change in Finland’s current account balance, which over the past 15 years has gone from a sizeable surplus (around 9% of GDP in 2001) to a small deficit (around -1% of GDP in past four years). This would under normal circumstances require a (real) exchange rate depreciation to restore competitiveness. However, as Finland is a member of the euro such adjustment has not been possible through a nominal depreciation of the currency and instead Finland has had to rely on an internal devaluation through lower price and wage growth. However, Finland’s labour market is excessively regulated and non-wage costs are high, which means that the internal devaluation has been very sluggish. As a result growth has suffered significantly.

In fact, Finland’s real GDP level today is around 5% lower than at the onset of the crisis in 2008. This makes the present recession – or rather depression – deeper and longer than the Great Depression in 1930 and the large Finnish banking crisis of the 1990s. Rightly we should call the present crisis Finland’s Greater Depression. ECB policy obviously has not helped. First of all, the 2011 rate hikes from the ECB had a significantly negative impact on Finnish growth. Second, the shocks that have hit the economy are decisively asymmetrical in nature. This means that Finnish growth increasingly has come out of sync with the core Eurozone countries – such as Germany, Belgium and France.

Hence, Finland is a very good example that the eurozone is not an “Optimal Currency Area”, where one monetary policy fits all countries. Concluding, the crisis would likely have been a lot shorter and less deep had Finland had its own currency. This would not have protected Finland from the shocks – Nokia would still have done badly, and exports to Russia would still have been hit by the crisis in the Russian economy, but a currency depreciation would have done a lot to offset these shocks.

EU plans to seal the world’s largest free trade deal with the United States are threatened by intractable differences over food names, none more so than the right of cheese makers to use the term “feta”. Negotiators talk of accelerated progress and hope to thrash out a skeleton agreement on a Transatlantic Trade and Investment Partnership (TTIP) within a year, aiming for a major boost to growth in the advanced Western economies. But geographical indications (GIs), a 1,200-long list ranging from champagne to Parma ham, present a major headache. At the same time as euro zone leaders are ordering Greece to balance its budget and liberalise its product markets, EU trade negotiators are fighting to defend its signature cheese.

GIs are a cornerstone of EU agricultural and trade policy, designed to ensure that only products from a given region can carry a name. To the United States, it smacks of protectionism. “It’s politically extremely important in Europe. As (the EU) phases out direct agricultural support, there has to be a trade-off by promising to do more in trade policy,” said Hosuk Lee-Makiyama, director of the European Centre for International Political Economy. “For 20 years they have been fighting about it at the World Trade Organisation even if the economic value is disputed.” EU member states will have to approve any deal and will need food name protection as compensation for EU farmers facing a flood of U.S. beef and pork imports.

Agriculture is not a sizeable part of either the EU or the U.S. economy, but farmers retain political muscle, as French livestock and dairy producers showed this week by forcing the government to offer aid after protests including road blockades. Washington does not object to protection of niche items such as British Melton Mowbray pork pies. But negotiators face a very difficult task to find a balance for widely produced feta, Parma ham or parmesan, the biggest maker of which is America’s Kraft Foods. The EU introduced GIs and designations of origin in 1992, securing protection for Greek feta, which means “slice”, 10 years later when it declared that non-Greek producers’ use of the term was “fraudulent”.

It is a view echoed by Christina Onassis, marketing manager at the Lytras & Sons dairy in central Greece. She describes the unique plants and microflora of Greece’s mountainous regions and says feta “imitations” mostly use cow’s milk. “For 6,000 years, Greece has produced continuously using milk from ewes and goats,” she said. “We also ripen the cheese for days, which does not happen in any other feta production.”

Maybe it has been the strange twists and turns of the Greek financial crisis that have brought the anomalies of who it is that runs the the IMF into sharper focus – whatever the reason the Fund’s leaders certainly seem concerned. “Our governance needs to be fully modernised to reflect an ever-changing world,” said David Lipton, the IMF’s first deputy managing director – spelling out the problem facing the organisation as he sees it. “If you’re China or a fast-growing country, you need to know that there’ll be a series of changes that enable your role at the IMF to grow,” he told the BBC World Service’s In the Balance programme. Since being set up in 1944 at the Bretton Woods Conference along with the World Bank, the IMF has played a critical and at times controversial role in stabilising the global economy.

It has intervened in national economies with huge loans and often a highly prescriptive set of loan conditions as it did in the 1997 and 1998 East Asian crisis, in Africa throughout the last three decades and most recently in the eurozone in Ireland in 2010, in Portugal in 2011 – and of course, now in Greece. IMF loan agreements usually require severe cut-backs in government spending – austerity with a capital ‘A’ – tax reform, pensions reforms and a crackdown on corruption. The Fund rarely leaves a country with more friends than it had when it arrived. But recently there has the increasingly noisy criticism of the IMF’s pecking order. For many outside the Fund there is the nagging question which comes along with its loans and the calls for countries to reform their economies: “Says who?”
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Under the rules agreed when the IMF was established, every IMF managing director must be a European. Currently it is Christine Lagarde – and in fact five of the 11 IMF’s leaders have been French. Meanwhile, the head of the World Bank must be an American, say those same rules. So when unpopular measures are demanded by the IMF in exchange for funding for a country, there is a sense that the West, the world’s richer economies, the ones that have been calling the shots for the last 70 years and are seemingly willing to ignore the rapidly shifting global economic landscape – are still calling the shots. Harvard University’s Prof Kenneth Rogoff, and formerly chief economist at the IMF said: “The number one issue for the IMF, is to dispense with the ridiculous requirement that the managing director be a European, and that the World Bank be run by an American.” “It’s an incredible anachronism.”

Prof Ngaire Woods, an expert in global governance and dean of the Blavatnik school of government, Oxford University, goes further: “I think the risk to the IMF is irrelevance and marginalisation.” “Emerging economies are using other things – anything but rely on the IMF. If you’re sitting in Zambia, Brazil or China, it looks like an organisation that’s still run by the USA and Europe.”

Pearson is in advanced talks to sell its 50% stake in the Economist magazine, people familiar with the matter say. The deal would be valued at about £500 million, one of the people said. The prospective buyer of the stake was described as a “diversified, western media company.” The planned deal, which would come on the heels of Pearson’s sale of the Financial Times to Japan’s Nikkei earlier this week, would represent the 171-year-old U.K. group’s latest major divestiture as it seeks to focus on its core education business. The price tag implies a value for the entire Economist Group of £1 billion, a multiple of 17 times the company’s annual operating earnings of £60 million. That’s about half the 35 times the FT’s operating profit that Nikkei agreed to pay Pearson.

But in contrast to that sale, the Economist deal would not offer the buyer a controlling stake. Pearson had hoped to announce the sale concurrently with the FT transaction and its half-year earnings this week, but last minute complications prevented it from doing so, according to a source. Founded in 1843 in London, the weekly “newspaper” as the Economist refers to itself, has long been an influential voice in global journalism, renowned for its sharp, often irreverent analysis of the world stage. Like the FT, the Economist is considered a trophy asset with an influence that outstrips its global circulation of 1.6 million.

The remaining 50% of the Economist not controlled by Pearson is owned by a diverse group of shareholders including Evelyn Robert Adrian de Rothschild, an heir to the banking dynasty and a former chairman of the magazine group. His wife, American-born Lynn Forester de Rothschild, is a member of the Economist’s board. The Rothschild Group, the boutique M&A firm controlled by the family, advised Nikkei on its purchase of the FT. Under a complex shareholder agreement, Pearson would have to obtain the approval of four trustees charged with preserving the magazine’s legacy and independence before transferring any shares to a different owner. That narrows considerably the pool of potential buyers.